The upshot is he got Warren Mosler to read my plan and respond.
READ HIS RESPONSE PLEASE. To regular upstanding folk, I apologize this post is going to use a bunch of jargon that only oddballs and social curiosities geek out on.
GI CYB is essentially the MicroEcon Husband to NGDPLT, the MacroEcon wife.
Sumner’s NGDPLT alters the discussion in a way that Austrians don’t love, but they recognize its hammer value to smash the feet of fake Keynesians.
Note: Most folks who claim to be Keynesians are liars, to be a real devotee, you have to show us you were screaming not to grow govt. when Bill Clinton was POTUS. It’s better to just admit you are anti-business, want a bigger state even if it is bloated and provably inefficient and be done with it.
Similarly, Austrians don’t love GI CYB, since it accepts the social commitment that all citizens in a state must have their nut covered - paid for by others using taxes. BUT once you grant that one affordable demand, GI CYB allows you to expose all kinds of other hidden agendas inside an Economist’s babble.
Mosler’s approach to GI is the govt. prints money and hires the unemployed, decides the kinds of jobs they should be doing, how much to pay them ($8 per hour), and then also judges them on whether they have done a good job. And when the economy heats up, the govt. taxes some other people of its own selection based on its own ideals.
It’s disgusting. It makes me throw up in my mouth. The less deciderism the govt. engages in, the better off we all are. Technocrats are self dealers. Enough said.
While Mosler may be able to describe the flow of money, he makes a more fundamental mistake: In a global economy, wages are not the correct tool to provide a state’s social safety net.
But right off the bat we see the weakness of Macro guys talking about GI, as theirs requires a total US solution. It requires a total rewrite of US Constitution, and probably an outright civil war, whereas GI CYB can be deployed in Texas or Indiana without even chatting with the Fed.
But moving on…
His main frame is Sultans and their Fanners. His concern is that people with money get to buy up the unemployed. He fears a yacht based economy.
This simply doesn’t happen:
- GI CYB limits the distance labor must travel for work, this is a single input variable (1 mile, 5 miles, etc) on a software platform that alone limits who can buy.
- I directly encode smallness into GI CYB by limiting the pool of potential buyers to essentially individuals and small businesses. I’m a distributist.
- This leads to blue collar entrepreneurs moving into ghettos and entrepreneurship amongst the folks on GI. It creates A LOT of economic mobility (we’ll get into that at the end).
Endeavoring to be charitable to Mosler, I’d try to make him understand the oligarchs will hate GI CYB. Any Fortune 1000 company that pays low wages today, will have to pay a wage premium to keep their workforce from quitting and joining GI CYB.
It does seem the Mosler makes the same kind of mistake that Matt Yglasias makes about labor prices: when prices go down, consumption increases. There’s really no such thing as inelastic demand in labor. And at $40 per week, we’re talking about a MASSIVE price change, not a little incremental one.
Which gets to the deeper meat of Mosler’s mindset:
jobs that produce output for sale are a function of sales. this doesn’t increase sales other than via increased govt deficit spending for this program.
GI CYB reduces total govt spending AND puts everyone to work AND increases overall consumption. The nominal aggregate doesn’t matter just this once. Macro guys ride in the back.
Essentially, when you take a bat to sticky wages and structure your state’s economy around liquidating every resource at the low end, squeezing the juice out of every human asset, there will be blood on the street while everyone adjusts once, but this is happening during the wild cowboy days of the new American economy….
Its the gold rush and dismantling the fed, and whipping Wall Street, and changing the dynamics of international markets and foreign labor, while your state is kicking serious ass.
Note: When you are watching the shell game of economics keep your eye on consumption. As long as overall human consumption, particularly with the poor goes up, you are in salad days.
I think the easiest way to try and crack through to MMTers and Progressives in general is this argument:
GI CYB not only gives recipients in ghettos a nominal amount of $, it reduces the costs of the things they are buying, so they get a consumption twofer. Its higher Power Purchasing Parity except the GI is priced against American wages.
DISTRIBUTISM: capitalism that groks the 80 /20 rule
Mosler posits that we’d see everyone jump into the GI plan:
“my quick guestimate tells me the dynamics will tend to drive pretty much everyone into the auction in a massive shift to a sultan/sultan fanner economy. Cost sensitive businesses will tend to ‘replace’ as many workers as possible with auction workers, which tends to reduce aggregate demand/increase ‘savings desires’ and thereby intensify the shift to auction work.”
And I want to be clear about this. It won’t happen, but that would be fine with me. And he is right that when Texas does this, other states will have to follow, as the unemployed and entrepreneurs flood in.
I’m a distributist. Think of it like franchisees. I don’t mind if there are national chains, but I want each store to have a different owner.
I’d be fine with each McDonalds having a unique owner who maxes out on low cost GI recipients because:
- He’s still going to have to bid HIGHER to get long term employees.
- After he hits $3M in income (some variable set by state), he can’t use the system to hire more.
I fully understand that this creates a certain amount of inefficiency in the economy, BUT I claim two hard core advantages:
- Big Government is a unmeasured negative externality to Big Business. By weakening the Fortune 1000 against a million richer SMB owners, we reduce the power of DC vs. states. Think of this as making America anti-fragile.
- What matters is the wealth disparity among the top 20%.
The top 20% deliver 80% of the economy. The bottom 80% will work in service to the top 20%.
I know it sucks to hear this. Get over it.
Note Izabella Kaminska: We’re not going to tell the top 20% to work less…. we want them to work 80+ hours a week, they NEED support! There’s plenty the bottom 80% can do for 40 hours a week to keep the 20% going. And my GI CYB delivers for far more hedons than your imaginary leisure society. Please hippies get this through your head… increasing work increases consumption, and consumption is what matters.
BUT, we can be glad that more than 1/3 will spend some of their earning lifetime time in the top 20%.
We can also cheer that GI CYB increases economic mobility, we should want 1/2 or more to spend some time in top 20%.
My point is, Mosler and many of the left like to talk about Sultan / Fanners or 1% and 99%, but if they really care about it…
They’d be focusing on how to get the wealth of the top 20% distributed more evenly among the top 20%:
- Because then there are more customers who want yoga lessons and manicures.
- Because the top 1/3, who self identify in the top 20%, have the political muscle to whip the 1%.
- Because 1/3 (I think it can be 1/2) are not SULTANS nor are they OLIGARCHS, they are the top third or half kids in school.
- Because we’re not commies, and grasping reality with both hands means admitting that the folks who own their homes and run the churches and the PTAs and own the SMBs and 300M guns, they are the best kind of people, the kind we want to give VETO power over econ bloggers and college professors…. who don’t mind Sultans as long as their technocracy get to be in the 1%.
And now I’m going to ask @interfluidity for some feedback… I’ll keep editing this.